Key to Mayor’s Health Push, NYC’s Public Hospitals Face Uncertain Financial Future

 

This January, Mayor de Blasio unveiled NYC Care, a healthcare plan for undocumented immigrants and other New Yorkers who do not qualify for insurance. The $100 million investment hopes to guarantee healthcare coverage for all New Yorkers, as well as bolster the pre-existing public insurance option, MetroPlus. All patients on NYC Care will have direct access to facilities within the Health + Hospitals system.

The initiative has raised questions about the health of the public hospital network. That system was in a state of critical condition in 2016. In order to keep Health + Hospitals afloat financially and temporarily stabilize the system, de Blasio made a series of emergency payments, totaling $497 million.

Alongside this infusion of cash, the administration called for an organizational overhaul of the Health + Hospitals system. At the time of the first payment in Jan. 2016, de Blasio said Health + Hospitals needed to transform its operating model drastically in order to get out of the red and reach fiscal solvency.

A rescue plan in 2016

Stabilizing funding, strengthening care, improving operational efficiency and restructuring payments were the four primary goals outlined in de Blasio’s Health + Hospitals Transformation Plan, One New York: Health Care for Our Neighborhoods, released in April 2016.

As the safety-net provider for all New Yorkers regardless of insurance status, Health + Hospitals treats a larger number of low-income and uninsured patients than private hospitals in New York City.

According to administration data released in 2016, almost 70 percent of Health + Hospitals patients were on Medicaid or uninsured, compared to 40 percent for other hospitals throughout New York City.

All hospitals cross-subsidize their uninsured and Medicaid patients with those who have commercial insurance, commonly referred to as the payer mix. But because Health + Hospitals has a smaller share commercially insured patients seeking treatment at their facilities, the system’s capacity to cross-subsidize is more challenging.

This, combined with decreases in federal and state funding for the uninsured, a loss of Medicaid patients to other hospitals and empty beds across facilities, has driven Health + Hospitals’ financial gap.

With a deficit forecasted to reach $1.8 billion by fiscal year 2020 if Health + Hospitals does not implement corrective measures, the system faced pressure to increase revenue and reduce expenses.

In order to diminish the deficit and retool for a stronger future, Health + Hospitals established a seven-point financial plan to achieve transformation, building upon de Blasio’s recommendations.

Three years later, the question remains: is the financial state of Health + Hospitals better now than it was in 2016?

Early progress seen

“It appears [Health + Hospitals] is making progress,” Mariana Alexander, research associate at Citizens Budget Commission says, explaining that the system has started to cut down on headcount, hire more primary care staff and better bill through insurance.

According to President and Chief Executive Officer of Health + Hospitals Mitchell Katz’s testimony at the New York City Council Executive Budget Hearing in May 2018, the system was on track to achieve $616 million through revenue generating initiatives in the fiscal year and $345 in expense reductions.

By identifying enhanced reimbursements in the Medicaid and Medicare appeals process, Health + Hospitals says it was able to improve revenue collections.

An increase in revenue flow, combined with headcount and procurement savings, has provided offsets to budget gaps in excess of $1 billion each year.

In his 2018 testimony, Katz predicted Health + Hospitals would close out the fiscal year with a cash balance of over $600 million. The system exceeded this projection, which suggests financial improvement.

“[Health + Hospitals] closed fiscal year 2018 with $747 million cash on hand,” Alexander says, an amount that was $130 million more than they ended with the previous year.

At the close of fiscal year 2018, the city also provided $200 million in prepayments to Health + Hospitals, improving their cash balance at the time of fiscal year 2019 budget adoption.

With an increased cash balance, Health + Hospitals was able to repay the city for some of the expenses it owed from 2015 and 2016.

“What we see in this year’s budget has been that H+H is now starting to pay the city back,” Melinda Elias, budget and policy analyst at the Independent Budget Office, says. “So that’s a sign that the system is doing a bit better.”

Federal cuts loom

“H+H should be commended on its success with its Transformation Plan,” New York City Comptroller Scott Stringer said in a written statement to City Limits. “But federal cuts still loom unresolved, and that risk can’t be ignored.”

The cuts in question are to disproportionate share hospital (DSH) payments, which provide healthcare providers who see a larger share of uninsured Medicaid patients with funding.

New York state receives about 15 percent of the federal allocation for DSH funds, which is roughly $3.5 billion. Health + Hospitals is the largest recipient of DSH at about $1.4 billion.

Cuts to those payments were supposed to begin in conjunction with the Affordable Care Act, but they have been deferred several times. Now, they are delayed until fiscal year 2020.

A delay in disproportionate share hospital (DSH) payment reductions has greatly benefited Health + Hospitals’ financial situation. According to Health + Hospitals, the restoration of the scheduled DSH cuts would result in a $700 million loss to Health + Hospitals funding.

“If there’s going to be a cut in DSH, H+H is going to eat the entire cut,” Alexander says. “And the other facilities won’t be affected because of how the formula works.”

If DSH cuts are to come back, Health + Hospitals will bear the significant brunt of the scaleback.

“The federal government needs to step up for public hospitals by permanently restoring DSH payments,” Stringer says.

Mayor’s plan comes amid declining patient numbers

The number of patients Health + Hospitals sees has declined over the past three fiscal years, according to the system’s fiscal report in March 2018.

While other hospitals saw an increase in Medicaid patients, Health + Hospitals faced a 3  percent decline. The busiest Health + Hospitals facilities have less than 10 percent of empty beds, but, at the most underutilized facilities, more than half are empty.

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“H+H is making a lot of investments and hoping that their outpatient visits will increase,” Elias says. “But it’s still too early to see if that will happen.”

MetroPlus, Health + Hospitals’ health insurance plan, is an effort to bring patient and revenue growth. But nearly two thirds of MetroPlus’ medical spending, which amounts to more than $1 billion per year, goes outside of the Health + Hospitals system, Katz says.

“We are working closely together to improve access at our facilities, reduce wait times, and improve our referral processes so that we can keep more of these MetroPlus members,” Katz says during his May 2018 testimony.

Alexander says Health + Hospitals needs to not only get more eligible people enrolled in MetroPlus, but ensure that those individuals seek out their facilities for treatment.

“If they’re able to have those people get services at H+H, then they have a healthy feedback loop,” Alexander says. “But if those people who are on MetroPlus go to other facilities, then that’s problematic.”

So what will the impact of NYC Cares be on the hospital system? Alexander says providing coordinated care to people ineligible for insurance may help reduce long-term costs for Health + Hospitals, as patients can seek treatment before they reach a crisis level and need to go to the emergency room.

“But on the flip side, you’re instituting a program that’s trying to drive more uninsurable patients to your facilities,” Alexander says, “You’re providing more uncompensated care than you were in the past so that’s a potential negative, financially speaking.”

NYC Care launches this summer in the Bronx and will be fully available to all New Yorkers by 2021.